Should you buy Future Consumer or Future Retail?

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Whereas our main Indexes Nifty and Sensex are continuously making new lifetime highs which has made our market little expensive for short-term, there are still many available options for traders and investors in this market.

If you are aware about the Future Group stocks or following it from last few weeks and months, you would probably have knowledge about how they have reacted over past 2-3 years. During 2017, we had seen a great buying in Future group stocks especially in Future consumer and Future retail. However as of now, these two stocks are available at a great discount from their 52week highs.

Given below is a brief study and analysis of Future consumer and Future retail shares to identify which is the best one now at current levels. It is an extract from one of my quora answers. So, it is possible for you to discover some links connecting you to quora in this post.

Should you buy Future Consumer or Future Retail?

Valuations of both the shares are not expensive nor rich. Means investing at current levels in both stocks provides some comfort level and potential upside. However, it is necessary to know how much both stocks have potential upside.

Future Consumer

In future consumer, the total revenue stood around Rs 840 crore and almost zero profit for quarter ended on June. As against this, its market capital is just around Rs 10,000 crore. Whereas in other FMCG companies, it is common to find almost 30 times more market capital than quarterly revenue number. Means, if ITC is generating around 10,000 crore revenue in a single quarter, than it is possible to find ITC trading around with 3 lakh crore market capital.

In most of cases, you will find this multiple is the most prevailing one. So, through this, it can be assumed that Future consumer has also potential to trade with 30 multiple of revenue i.e with around 25,000 crore market capital. But because Future consumer has almost nill net profit and has similar but little different product line, I think Target of 92 is the best suitable level for investors to book profits if they have a view like 1 year.

Future Retail

In Future retail, the condition of financials is little different. From last many quarters, revenue and net profit number of company has been stable around Rs 4500 crore and Rs 150 crore respectively. On profit margin front, it seems that Future retail is not far behind its competitor Avenue supermart. However, it is true that it has low profit margin as compare to DMart and others. But overall i think Future Retail as compare to its competitors is performing good and has potential to improve its margin levels in coming future.

Now coming to valuations, it can be easily concluded that despite of similar financial health, Future retail is trading at very low valuations as compare to its peers. Whereas, Industry PE level is around 150, normal PE level of Future retail is just around 50–60 range. Balance Sheet strength of the company is also good but still despite of these things, stock is trading around just Rs 550 which is comparatively far below than its peers. Although, as per current financial condition of the company, I think target of Rs 680–720 is easily possible in the stock in Short-term. However for a longer time period like 1 year, I think levels of 880/900 are also possible in stock.

Which one is better?

So overall, in my opinion both Future Retail and Future consumer are good stocks for buying/investment purpose. Both have similar valuations as compare to their peers. The only little difference between Future Retail and Future consumer is that in Future Retail, you will definitely get a little better safety than Future consumer. Whereas, Future consumer gives little more potential upside than Future Retail.

Have any question related to this post? Feel free to ask through comment box given below.


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2 thoughts on “Should you buy Future Consumer or Future Retail?

  • September 1, 2018 at 4:40 am
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    Excellent analysis…

    Reply
    • September 5, 2018 at 10:15 am
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      Thanks for your appreciation…

      Reply

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